U.S. Markets close in 2 hrs 53 mins

Should You Avoid PetroChina Company Limited (PTR) Like Hedge Funds Did?

Nina Todic

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about PetroChina Company Limited (NYSE:PTR) in this article.

Is PetroChina Company Limited (NYSE:PTR) a buy here? Hedge funds are reducing their bets on the stock. The number of long hedge fund bets fell by 3 lately. Our calculations also showed that PTR isn't among the 30 most popular stocks among hedge funds (see the video at the end of this article).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Millennium Management, Catapult Capital Management

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to review the key hedge fund action encompassing PetroChina Company Limited (NYSE:PTR).

How have hedgies been trading PetroChina Company Limited (NYSE:PTR)?

Heading into the third quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in PTR a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with PTR Positions

More specifically, Renaissance Technologies was the largest shareholder of PetroChina Company Limited (NYSE:PTR), with a stake worth $55.7 million reported as of the end of March. Trailing Renaissance Technologies was Arrowstreet Capital, which amassed a stake valued at $28.1 million. AQR Capital Management, Millennium Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Seeing as PetroChina Company Limited (NYSE:PTR) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of hedgies who were dropping their entire stakes in the second quarter. It's worth mentioning that Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners said goodbye to the biggest stake of all the hedgies monitored by Insider Monkey, totaling close to $4.2 million in call options. Ken Griffin's fund, Citadel Investment Group, also sold off its call options, about $1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 3 funds in the second quarter.

Let's check out hedge fund activity in other stocks similar to PetroChina Company Limited (NYSE:PTR). These stocks are 3M Company (NYSE:MMM), NextEra Energy, Inc. (NYSE:NEE), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), and NVIDIA Corporation (NASDAQ:NVDA). This group of stocks' market values are closest to PTR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MMM,40,939257,-3 NEE,40,742117,4 PBR,32,2194573,2 NVDA,45,1780215,2 Average,39.25,1414041,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.25 hedge funds with bullish positions and the average amount invested in these stocks was $1414 million. That figure was $103 million in PTR's case. NVIDIA Corporation (NASDAQ:NVDA) is the most popular stock in this table. On the other hand Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks PetroChina Company Limited (NYSE:PTR) is even less popular than PBR. Hedge funds dodged a bullet by taking a bearish stance towards PTR. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately PTR wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); PTR investors were disappointed as the stock returned -5.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

Related Content